The Sima Nan Tax Evasion Incident Escalates, MCN Company Gets Thrown under the Bus

The incident of the Chinese Communist Party’s top propaganda official, Sima Nan, being involved in tax evasion is still causing a stir. Sima Nan attempted to shift the blame to the cooperating MCN company, but the MCN side publicly refuted his claims, sparking even greater controversy. This case has not only shattered Sima Nan’s image as a “patriotic fighter,” but has also exposed the gray area of tax operations in the mainland’s internet celebrity economy.

On March 21st, the Beijing official report stated that the well-known internet celebrity Sima Nan, from 2019 to 2023, underreported personal income tax and value-added tax totaling 4.6243 million RMB through methods such as concealing income and falsely reporting. In addition, his controlling company, a certain film and television planning center in Beijing, also underpaid the corporate income tax by 753,200 RMB through means like falsely listing costs and abusing small and micro-enterprise preferential policies. The tax department legally ordered Sima Nan and his company to repay the taxes, imposed late payment penalties, and fined a total of 9.2694 million RMB.

This incident has sparked widespread attention, with mainland media criticizing Sima Nan and his sharp tongue. It has also prompted public reflection on “patriotic internet celebrities.” Sima Nan has long presented himself as an “anti-American warrior” and a supporter of the Chinese Communist Party, but this tax evasion case has shattered his “patriotic” image.

According to reports from Red Star News, when responding to the allegations, Sima Nan indirectly expressed his “grievance,” stating that he had cooperated with a certain MCN institution for over six years and received over six million RMB in remuneration, but faced fines exceeding nine million RMB. He claimed that the MCN company promised to handle his tax payments on his behalf but failed to do so, leading to his penalties. Sima Nan also mentioned that he had requested “tax invoices” multiple times but “did not realize the extreme importance of this issue.”

However, critics argue that Sima Nan’s response fails to explain the various methods mentioned in the official report, such as “concealing income” and “falsely reporting,” which led to the underpayment of taxes. Additionally, Sima Nan did not clarify who was supposed to bear the burden of paying the taxes and avoided mentioning the name of the MCN company he was associated with.

Reports from Interface News revealed that the MCN company Sima Nan collaborated with is April Chinese (Beijing) Cultural Media Co., Ltd, and his partnership with this company has spanned several years.

Recently, the well-known internet celebrity Wang Xiaodong claimed that the controlling person behind the MCN company that worked with Sima Nan is Rao Jin. Having known Rao Jin for many years, Wang Xiaodong stated that Rao Jin denied Sima Nan’s accusations, claiming that Sima Nan had taken all the earnings and the MCN company could not withhold taxes on his behalf.

On March 23rd, Wang Xiaodong, on his Douyin account, stated that the owner of the MCN company he previously collaborated with called him and said, “This blame cannot be placed on me.”

The owner explained that at that time, Sima Nan indeed had high traffic and earned a considerable income, reaching a “very high” percentage that required tax payment, around “not less than 45%.” In many cases, MCN companies deduct taxes from the income of influencers and handle the tax payments on their behalf, but this was not agreed upon by Sima Nan.

“He wanted to take away too much money,” Wang Xiaodong said, mentioning the owner told him, “If MCN had to advance (pay) this tax, it simply couldn’t do so as Sima Nan had already taken all the money.”

Wang Xiaodong asked the owner whether there was a written agreement between them and Sima Nan on whether the MCN company should withhold the taxes or the money should be given entirely to Sima Nan for him to handle the tax payment, to which the owner responded there was no written agreement. The owner emphasized that Sima Nan insisted on taking all the money, leaving no funds for tax withholding, thus absolving themselves of any responsibility in the matter.

Furthermore, Wang Xiaodong stated that the owner mentioned that since November 2024, the tax inspection department had started examining their company’s accounts but found no issues, which were also not mentioned in the information released by the tax authorities. He noted that now Sima Nan was shifting blame to the MCN company publicly, causing him a lot of frustration. Therefore, he sought out acquaintances to explain.

When contacted, Rao Jin stated he was about to board a flight and would respond later. Subsequently, he replied on WeChat, saying, “I cannot elaborate. I am not very clear about the specific situation because we have not been cooperating since 2022. The film and television planning company and the studio in Hainan mentioned in the report have no relation to us. Please rely on the tax authorities’ report.”

Regarding Rao Jin’s explanations and the absence of a written agreement with the MCN company, and why Sima Nan did not respond to multiple calls, nor did he reply to the messages sent to him.

An analysis from a former senior executive of an MCN company in Chengdu mentioned that MCN companies and internet celebrities have a cooperative relationship, and typically sign cooperation agreements detailing profit distribution and tax payment arrangements. Normally, the income of internet celebrities is withheld by MCN companies for tax purposes. Sima Nan’s case of not signing a written agreement with the MCN company while having substantial income is quite unusual. It also raises questions why Sima Nan, with such significant earnings, never paid attention to his tax obligations. It seems illogical that he never reported his personal annual comprehensive income for tax purposes.

According to business registration information, Sima Nan’s named media Chinese film and television planning center in Beijing and the Yajzhou Sima Nan Cultural Studio in Sanya both fall under small and micro-enterprises. The Chinese film and television planning center in Beijing is registered in Pinggu District, Beijing, an area with preferential tax policies and numerous registered enterprises without actual operations. Furthermore, the Yajzhou Sima Nan Cultural Studio is registered in the Hainan Free Trade Port, where enterprises can enjoy lower corporate and personal income tax preferential policies.

Moreover, the Yajzhou Sima Nan Cultural Studio, for which Sima Nan serves as the legal representative, was registered in April 2023 and changed to Yajzhou Bay Free Trade Zone A, 12th Floor, 1207-3 in August 2024.

According to Hainan Free Trade Port policies, enterprises registered in the area can benefit from various advantages in terms of taxes, funds, and more. In terms of tax benefits, eligible companies can enjoy the “double 15%” policy, allowing a maximum corporate income tax rate of 15%, exemption from taxation on personal income exceeding 15%, as well as potential advantages in loans, venue rent, among others.

The former senior executive of the MCN company explained that such “tax havens” often attract professionals in the entertainment industry, including actors and internet celebrities, to establish studios in order to benefit from tax incentives. However, if companies are not actually operating in the area but are using such policies for financial transactions, it could potentially involve tax evasion or tax avoidance.